A price index is a measure of how much money a specific group of items and services, referred to as a market basket, costs at a particular time. It helps to determine one's cost of living, although other factors also come into play. The price index during one time period is often compared to the index that is calculated at another time. By doing so, the user can figure out the rate of inflation
. or deflation. The price index for one year is commonly checked against the index from the previous year.The United States price index primarily reports the spending patterns of urban consumers, who make up around 87 percent of the population. The items in the market basket are chosen from a sampling of services and goods that such customers actually purchased during the time period in question. The categories include medical care, apparel, recreation, housing and transportation. To determine accurate prices, employees from the Bureau of Labor Statistics record the costs of the items or services in question. Specialists then review this information to ensure its consistency.The United States price index was initiated in 1919. Statistics from 1913-18 were estimated. A full index is posted at ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt. It includes the price of the market basket for each month during 1974. That year, the January cost was 46.6. The price was then higher during every other month of the year, resulting in an 11.0 percent increase in the price index from the beginning of 1974 as compared to the end of the year. In addition, the December 1974 index was 12.3 percent higher than the December 1973 index.Another index for 1974 is available at http://research.stlouisfed.org/fred2/data/CPIAUCSL.txt. These figures extend to three decimal places, which increases their accuracy. At http://www.inflation.eu/inflation-rates/united-states/historic-inflation/cpi-inflation-united-states-1974.aspx, the rates from the 1974 index are displayed on a chart. The prices of the monthly 1974 market baskets are also compared to 1973's monthly prices in detail. More reference links: http://www.nh.gov/nhes/elmi/cpi.htm http://www.bls.gov/cpi/cpiovrvw.htm
